How Accepting Cryptocurrency Could Save Businesses Money
If you’re like many, you’ve probably heard a lot about cryptocurrency in the past few years. It grows in popularity every day, and for businesses, it could save them money. When deciding if cryptocurrency will work for your business, you should also consider the pros and cons. For some companies, the integration will work well. For others, though, it may not yet be a wise investment.
What is Cryptocurrency?
Cryptocurrency is an internet-based form of money that uses blockchain technology and cryptographic properties to facilitate a transaction. It is a decentralized platform, meaning it has no authoritative figures, banks, or institutions that control the information and money transfers. You’re essentially in charge of your own funds.
The two most common types of cryptocurrency are Bitcoin and Ethereum, though there are many more lesser-known ones out there. Each uses blockchain technology for conducting transactions and maintaining security. Each block represents a transaction that cryptography connects in the digital realm. The blocks hold information like timestamps and authentication processes.
The transaction process is important because the blockchain ensures a certain amount of security. Though this technology makes it difficult for cybercriminals to steal or harm your funds, these incidents can still occur. If you’re considering cryptocurrency for your business, you’ll want to consider how much money you can make, retain, and use for purchases through crypto funds. You’ll also want to research the security level of your chosen platform.
Benefits of Accepting Cryptocurrency
A business will see many benefits when accepting cryptocurrency. It’s a newer form of payment that can add dimension to the services and products a seller provides.
Cryptocurrency’s decentralized platform appeals to many. Banks and institutions can often be difficult to work with. If you’d like to transfer your money or start an investment account, sometimes a bank will advise against it or encourage loans. With crypto funds, you can control everything yourself. This dynamic gives you more agency to invest and sell the way you want to.
Cryptocurrency also makes it easier for groups of people to pay together in one payment. Crowd-sourced payments are necessary at times, especially for joint business deals. At some other times, customers will simply want to split purchases. Cryptocurrency makes that easy through its various platforms. Plus, you’ll see all this activity in a public ledger, which ensures more security.
While these benefits can be financially helpful, several other advantages can directly save money for businesses.
6 Types of Crypto Assets You Need to Know About
The cryptocurrency world is full of jargon; acronyms and futuristic words that could be straight out of the latest sci-fi flick.
Along with cryptocurrencies like Bitcoin and Litecoin, there are many other different types of crypto assets that can be found on the blockchain:
As the name suggests, stablecoins are designed for stability. These are cryptocurrencies that are directly pegged to real-world assets. These assets could be precious metals like gold, oil, or silver, or national currencies like the dollar and euro. Regardless of the asset, the value of each individual stablecoin aims to remain the same as the asset it represents: A dollar-backed stablecoin, for example, should be worth one dollar.
By tapping into the relative stability of real-world assets, stablecoins are designed to bring consistency to the cryptocurrency ecosystem. When volatility hits, traders can quickly swap cryptocurrencies back to a stable currency without the bother of converting to fiat.
Although most people refer to Ethereum as a cryptocurrency, the actual currency powering the Ethereum network is called Ether. As a currency, Ether lets users pay for processing power to run smart contracts on the network, or buy products and services within Ethereum like ICO tokens.
As a blockchain platform, Ethereum is designed to run smart contracts that form the infrastructure for a range of projects, like Microsoft’s Ethereum on Azure, and the Amazon Web Services blockchain framework.
Newcomers to Bitcoin often mistakenly think that transactions with the cryptocurrency are private. But, Bitcoin only offers pseudonymity rather than anonymity. All Bitcoin transactions are recorded on a public ledger under a code that can be traced back to a real-world identity with a little detective work.
Anonymous cryptocurrencies — like ZCash and Monero — aim to provide all the benefits of Bitcoin in a completely private package. This means that, theoretically, no record is kept of the transaction.
Basic Attention Token (BAT) is an example of another category of cryptocurrencies: Utility Tokens. These cryptocurrencies aim to fulfill a specific need within a blockchain platform.
Unlike security tokens, utility tokens are not intended as an investment. Instead, they are more similar to a coupon offered by a store to be used specifically for their products, or a pre-ordered token that promises access to a service that is still in development. BAT, for example, is used as payment within the Brave Browser.
Similar to stablecoins, tokenized assets are digital representations of real-world assets on the blockchain.
These tokens represent ownership of the underlying asset. If the asset was an apartment, for example, each token might represent a room. Ownership rights to that specific room would be written into the token smart contract, and the tokens can then be traded on a crypto exchange.
This has the advantage of providing liquidity, making it easier to trade traditionally illiquid assets like real estate, and also immutability, with the blockchain guaranteeing that ownership information cannot be easily changed.
Security tokens are traditional securities, transposed to the blockchain. Just like ordinary shares, these represent the purchase of a small percentage of a company and might pay holders a share of the company profits, and confer certain rights — like the ability to vote on the future direction of the company.
Unlike Initial Coin Offerings, which are unregistered, security tokens should be fully compliant with SEC regulations.
How It Can Save Money
For starters, transferring money with cryptocurrency is cheaper. Many payment services or banks may have fees that come with moving around your funds. Often, the more money you want to move, the higher the fee. When using cryptocurrency platforms, though, these fees are minuscule, which ultimately adds up so you can save.
Similarly, banks allow for chargebacks after business transactions occur. A chargeback lets a bank reverse a transaction, taking the money from a business and giving it back to the consumer. While these actions are sometimes necessary, it can be a significant loss of revenue for certain companies. Cryptocurrency doesn’t have chargebacks — all transactions are final. This dynamic lets the money stay with the business.
If you do choose to work with cryptocurrency, you can then expand your customer base. Among the demographics, millennials invest in cryptocurrency more than any other generation. As a business incorporates crypto payments, it will draw in more of this demographic. You can expect to see tech-savvy individuals supporting the company, too.
Cryptocurrency also makes international sales easier. There’s no intermediary, and you don’t need to adhere to conversions. Cryptocurrency is universal and can facilitate investments across borders.
Due to these money-saving benefits, the businesses that stand to gain the most from integrating cryptocurrency are bigger companies. Any business in the tech industry should start thinking about incorporating cryptocurrency, too, if they haven’t already. Progress remains frequent and fast in both of these areas — using cryptocurrency makes for a wise investment.
Should You Invest?
Ultimately, investing will be up to the business owner. If the risks outweigh the benefits, then it might not be the time to invest. However, if the pros are greater than the cons, it could be a money-saving option that will grow your enterprise.